A



I. Property theory

A. Themes

a. Property rights are relative, not absolute.

b. Property is a set of legal relationships among parties, not between parties and the thing.

c. Property can be intangible, i.e. right to commerce

d. Its about rights to a thing and interference with those rights, not the thing itself.

e. What (economic) incentives do different rules create for different parties? The outcome of a case will depend on what policy goals court has.

f. When people go to court they are asking court to find and protect an entitlement.

g. Always consider

i. equity/fairness/distribution

ii. efficiency/wealth maximization

iii. institutional competence

iv. remedy—property (injunction/right to sell it); liability (damages—court sets value and allows behavior to continue)

B. Acquisition by Capture

a. Pierson v. Post

i. Post was hunting for a fox with his dogs, when Pierson came along and killed the fox—who gets the ownership rights?

ii. Rule of capture is first-in-time rule, question here is first-in time to …what? Kill? Wound? Trap? Flush out? Invest resources in getting?

iii. What acts are required in order to establish the hunter’s superior right to possession relative to the interloper (or anyone else)?

iv. Hunter exerted effort, had hounds, was flushing it out, was in hot pursuit.

v. mere pursuit does not take you far enough along a continuum of effort to give you superior rights to the person who killed the fox.

vi. Rationales for holding

1. Certainty and preserving peace and order in society—rule provides consistency.

a. Pros of certainty/this rule

i. For society—it’s a bright-line rule, people have a clear idea of what they need to do to take the fox.

ii. For courts—reduces litigation and litigation is easier.

iii. For business—can plan affairs.

b. Cons of this rule

i. Not necessarily a rational rule

ii. May be too inflexible—it can’t take into account all future possible scenarios, could end up w/bad result in some cases

iii. Could go against societal interest

2. Precedent (Roman law/secondary texts) provided that in order to deprive a wild animal of its liberty one must trap it or wound it (or kill it), i.e. one must be farther along than Post was, hence mere pursuit is not enough.

vii. Other rationales they could have used

1. what is society’s interest (maybe want to prevent overkilling, or maybe want to encourage killing). Court thought society’s interest in having more foxes killed would be met if interlopers were rewarded/encouraged, dissent though this interest would be served by opposite rule.

2. possession—Post has it—what is enough to upset possession?

3. Needs of the parties—could allocate accordingly but this would produce a lot of uncertainty because very based on individuals.

4. Custom (of hunters)—this is what dissent used.

viii. Implications of holding

1. if Post had shot the fox and Pierson took it, case would have gone the other way—mortal wounding is enough to have possessory interest.

2. people may become more efficient fox-hunters, may invest in technology, b/c this rule raises the costs of fox-hunting for hunters (i.e. interloper may get the fox in the end). But if cost is too high people will stop hunting.

3. Could argue which rule meets societal goal of having more foxes hunted.

4. general thinking about the rule of capture is that it produces overkilling/overharvesting.

5. rights of tresspassers—T1 has superior rights to T2.

ix. Institutional competence—is court the best place to decide a forward-looking rule like this?

b. Ghen v. Rich

i. Custom/usage in whaling industry was used to decide case.

1. whales are harpooned with something that has a marking identifying whaler, whale sinks to the bottom

2. Person who finds the whale is expected to get word to whaler and will get salvage (fee for notification services).

3. court is saying ∆ knew whale did not die naturally and should have gotten word to the whalers instead of selling the whale, doesn’t matter whether harpoon was still in it.

ii. could have used rule of capture, instead of custom, and come up with same result (assuming party who did mortal wounding was identifiable). Why didn’t they?

1. time lag problem. (between mortal wounding and taking).

2. desire to support whaling industry (by institutionalizing its custom)—w/o the custom it would not be economical for people to engage in whaling.

3. custom seemed limited & affected small number of people (externalities)

4. had been recognized and acquiesced to by many people for a long time—other courts had followed it.

5. Rule provided for reasonable salvage, gave ∆ compensation for his work.

iii. Court does not evaluate the custom here, just gives deference to it.

1. Is it consistent with societal goals, how widely known is it?

2. better to evaluate independently whether custom comes up w/“right” rule.

3. Custom recognizes the benefit to whaling industry but not cost to rest of society—court doesn’t do cost-benefit analysis. Industry interest are narrow relative to overall societal interest

4. May be very class based (i.e. hunters, whalers). Problems with making it binding on all of society.

5. How will everybody find out about it (admin agencies, who are “the experts,” at least have notice and comments).

6. not as good as well-reasoned common law rules because of who makes them and fact that they don’t take all interests into account.

7. Custom can lead to over-harvesting.

c. Keeble (π) v. Hickeringill (∆)

i. What rule will get more ducks to market?

ii. Keeble did not have the ducks but had the right to take them, H interfered with that right. (looks like H was doing it to keep K from engaging in his business).

iii. Court says that π is engaging in a lawful activity, and it’s a societal good to take ducks to the market—unlawful interference with reasonable business activity.

iv. How to square this with result in Pierson?

1. rule based analysis: Rule of capture is that if you have not mortally wounded or deprived a wild animal of its liberty, you have no rights to it with which someone can interfere. Exception: if animals are on your property you have superior rights to them. So ∆ was interfering with π’s ownership rights which he had by virtue of animals being on his property.

2. societal interest—in this case, interest is bringing ducks to market. Rule does not tolerate interference with legitmate business. Does not insulate π from competition, but from malicious interference with a property right to engage in his business—a pretty abstract property right.

3. court in both cases can be seen to have been doing societal cost/benefit analysis and coming up with rule that best furthers that interest.

4. Schoolmaster line—if someone opened up another school in a small town and tried to encourage people to attend that would be ok because furthering competition, this hinders competition.

d. Hypo—Greenpeace blocks the whalers. Could impose Keeble rule, but societal interests have changed and there is question who is furthering them more?

i. Company would argue they have the right to capture the animals, and Greenpeace is interfering (like Keeble)

ii. But there is a societal interest, not just a private property interest.

iii. Greenpeace could say they are representing a community interest in preserving whales which comes up against the company’s interest in making $ off whaling.

iv. Following Keeble, Greenpeace would have to show that it was competing with whalers, not maliciously interfering with their business.

v. Maybe rule of competition that Pierson v. Post allows is the better one for this case since there are competing societal interests.

e. Fugitive resources, i.e. water, oil, natural gas

i. Rule of capture may apply—it is a “wild” thing that, using resources, you “capture.” But problems of allocation/fairness.

ii. England—unmodified rule of capture.

iii. US—reasonable use standard

1. but what if a new landowner’s use (i.e. developer) disrupts other’s ability to reasonably use, i.e. what if there’s not enough to go around?

2. resource allocation problems→regulation, zoning

3. Keeble rule is kinda like reasonable use standard. (HOW)

f. Domain names

i. vs. law.nyu.edu

ii. Rule of capture would say that first person to bring these names under her possession owns it and others have to buy it from her if they want it.

iii. Trademark—investment of goodwill, reputation—like Keeble’s effort. (but Keeble was also about the fact that pond was on his property).

iv. NYU has business interest in nyu.edu (that furthers the interest of society—how?), buyer does not (only to sell it to NYU)

v. —no individual company’s reputation or investment, more like Post—nobody did enough work to capture it.

vi. Question is whether the one who captures is seen as productive relative to the institution in the domain name.

vii. See Volskwagen v. VWI

g. rule of capture redux

i. pro

1. clear rule

2. rewards effort

ii. con

1. Encourages overconsumption of resources and overinvestment in capture technology.

2. Inefficient capture, i.e. overfishing—have to spend more to capture because fish are scarce

3. May lead to misallocation of resources in society

C. Why Private Ownership/the Tragedy of the Commons

a. Externalities

i. The question about custom and economic efficiency is one of externalities—custom does not take all societal costs into account.

ii. Definition--Any cost or benefit which is the result of a given action that the actor doesn’t take into account in determining whether to do the act. All x is going to take into account is the benefit to him (if he is RSE) not the loss to anyone else.

b. Reasons for private property

i. Wealth maximization/efficiency (Demsetz)

ii. Minimizes conflict—preserves order, since you know what’s yours and what’s not, but on the other hand it could produce conflict.

iii. To preserve what people had taken, to consolidate power (i.e. feudal regimes)—started out as might makes right and then preserves that.

iv. Encourages people to invest in a particular activity—the notion that if I have an ownership interest I will be more motivated, productive, etc.

v. Liberty interest—may also protect you against incursions—can act as a buffer between you and the state. Maybe identity interests (i.e. privacy). Western enlightenment notion of individual—connection between property and being.

vi. History of imposition of private property system by colonial power.

vii. Fear of scarcity/loss.

c. Demsetz article

i. Private property, communal ownership (all members of a group own the thing in common), open access (nobody owns, everyone can take).

ii. Say there are 100 people and 1000 trees, owned in common. Value of tree is $10, one person cuts down a tree and sells it, so now value to him of the whole forest is higher (since he got the profit for the tree), but value to everyone else is lower.

iii. Demsetz says this will happen a lot with communal property under rule of capture-- in a world where there is significant demand for what is communally owned, under a rule of capture, there will be overconsumption to the point of exhaustion and misallocation of resources (based on a wealth maximization standard). This is tragedy of the commons—even thought they are doing it in their own self-interest, its not in the community’s long-term interest.

iv. D says, because of this you would expect to see transition to private property (which will internalize the costs and benefits), because transaction costs of communal regulation are too high.

1. group decision making process

2. information gathering—want experts

3. enforcement costs

4. free-riders and holdout problems

5. market value taking into account all present and future value??

v. Doesn’t take into account transaction costs of converting to private property regime.

1. surveying, deciding how to divide it up

2. holdout problem

3. enforcement

4. problem of how resources get allocated and who gets to decide.

vi. Assumes wealth maximization/efficiency is the societal bottom line—what about fairness, equity, different ways of distributing resources?

vii. Does not explain all transitions to private property

viii. You don’t always see change to private property as the solution.

ix. Different ways of dealing with tragedy of the commons

1. Private property regime is synonymous with market forces which will dictate how many trees will be bought and sold—should lead to best for community because this includes future benefits in cost.

2. command and control regulation— i.e. gov’t says you can dump only x units of sulfur.

3. Marketable permits—issue permits to cut down a certain # of trees, people can sell them to each other.

4. conservation district within the property of trees that can never be cut down.

D. Finder’s Law

a. Armory v. Delamirie

i. Π is chimneysweep, he finds a jewel, takes it to a goldsmith, whose apprentice (agent) takes out the stones and refuses to give it back to him.

ii. Sweep wins action for damages (not replevin—return of object)

iii. the finder has superior rights against all but the true owner—property rights are relative not absolute.

iv. Bailment—person in possession of some property (bailor) gives it to someone else (bailee) for safekeeping, sweep becomes bailor.

v. What if owner comes back and sues? Should he sue sweep or smith?

b. Between 2 finders, F1 (prior possessor), F2 (current possessor), prevailing authority says F1 has superior rights

i. Encourages Honesty

1. disclosure of finding, since only O can take it from you.

2. finders can be open and notorious that they are finder not O’s

ii. Might think that F2 has superior rights (i.e. finders keepers losers weepers), but

1. that would require prior possessors to prove ownership all the time,

2. would move object farther away from true owner

3. might encourage stealing, overinvestment in finding technology.

4. would it make people take more care of their things?

5. might discourage finders from using things productively

6. societal interest in keeping things out of court would point to F2

iii. alternative rule--escheat to the state once O is out of the picture-

1. easier for O to find—if return to owner is our highest priority (for wealth maximization—people will invest and use their things if confident that they’ll get it back), this is the best rule.

2. finder’s fees legislation would encourage return to owner.

3. may discourage disclosure/honesty that you found something

c. Hannah v. Peel (King’s Bench 1945)

i. Hannah finds brooch in Peel’s requisitioned house, Peel has never lived there.

ii. Court finds for F1 against owner of property, may be an exception to gen’l rule

1. Peel has never lived there,

2. Incents F1 to be honest, rewards honest forthright young soldier

iii. But if we want true O to find it, maybe we should leave it w/house owner.

iv. Bridges v. Hawkesworth—π finds package full of money in a shop, leaves it with shopowner for O to return, but O does not, π wants it back. Items were not given to shop owner for safekeeping, but were lost (inadvertently dropped, etc) so it doesn't matter that it’s on the shopowners property, finder gets it.

1. is this best rule for policy of wanting owners to find their stuff?

2. suggestion--legislative compromise: item should be put in a public place (like a public lost and found) temporarily before being given to the finder.

v. McAvoy v. Medina—O leaves pocketbook on table in barbershop, π finds. Mislaid—intentionally placed somewhere and then forgotten. Finder’s law does not apply, barbershop keeps it b/c more likely O will return to where he left it.

vi. May be difficult to distinguish between lost and mislaid—how do you know O’s intent? And does O really place pocketbook in shopkeeper’s safekeeping (i.e. bailment) when he leaves it on the table in the shop? Will O come back only for mislaid property or will she retrace her steps as to lost property?

vii. What is buried or underwater on O’s land is O’s

1. South Saffordshire Water Co. v. Sharman—worker found rings at bottom of pool, they belong to pool owner

a. Worker is there for limited purpose

b. Land carries with it possession of things that are attached to or under the land.

2. Elwes v. Brigg Gas Co.—gas co finds prehistoric boat under land/soil leased to them by π, belongs to π (land owner)

a. Owner’s expectation that things under soil are part of the land.

viii. Distinction between attached and unattached objects may be arbitrary.

ix. Peel could have said brooch was mislaid, Hannah could have argued without him it would not be put to public use and would still be sitting there.

x. Owner of real property will prevail over a trespasser who finds something.

E. Acquisition by Discovery/Conquest (Johnson v. M’Intosh) (what should we take from this case?)

a. Π received title to land through Piankeshaw, ∆ through US government, via British (maybe Spanish and French too), who had “discovered” the land.

b. European countries agreed to rules of discovery/conquest, became entrenched in the history of the territory, court felt they had to follow (would be “disruptive” not to).

i. It was a custom, not all parties were at the table.

c. Rule of conquest--conquering sovereign takes over all the claims of property rights of the conquered sovereign, but private property rights recognized by the conquered sovereign are still recognized.

d. Discovery—i.e. there is no competing claim, no prior possessor.

e. Treaty of 1763—French and Indians signed over all their possession to England (only sovereign land).

f. Holding of the case:

i. NA’s can occupy but don’t have absolute property rights, can only sell to the sovereign, based on labor theory they were not owners of the land.

1. Labor theory (Locke)—mixing of your labor with the land makes it yours—your investment, to make land useful have to modify it.

ii. Admits that maybe conquering sovereign should have bought the rights from NA’s, but doesn’t want to disrupt things as they are.

iii. Land was granted under rule of conquest, can’t disrupt that now.

g. Think of this as a rule of capture—America as a whale waiting to be captured.

h. Institutional competence—courts of the conquering sovereign can’t change the rule.

F. Acquisition by Creation

a. International News Service v. Associated Press (1918)

i. Only AP is allowed to send news from Europe to US, INS uses news from AP

ii. What is the role of labor/productivity w/respect to an absolute or qualified right?

iii. News matter is not subject to copyright but since it is their stock in trade, which they gather at cost to themselves (labor theory), and which they sell, there exist property rights between them as to news matter after the moment of its publication—news matter as quasi-property.

1. analogy to Keeble—malicious interference. Competition is good as long as it does not interfere with trade. In this case it furthered the product getting to market, so not as strong an argument. But this is anti-competitive decision.

iv. Remedy (damages may have been more efficient result to break monopoly)

1. Court grants requested injunction-- Upheld AP’s entitlement to the work product of AP’s effort to collect the news, could preclude INS from appropriating their effort at their own discretion—i.e. could sell, but they have monopoly, so transaction costs are high.

2. Alternate—INS can use it but has to pay damages. This would still be a ruling for AP, an upholding of their entitlement (but not the right to exclude), but court would have to decide value of news-getting labor vs. INS’s added value (distribution).

v. Policy issues (efficiency and fairness)

1. Is this the efficient outcome? No one is representing the public vis-a-vis the news, there are externalities. Court only has parties before it—institutional competence—should court make this rule?

2. balancing efficiency and equity/fairness—here equity wins, on labor theory of property.

3. maybe should let the market decide (in Cheney some will want the original, but consumers may not care AP vs INS).

4. fairness—

a. there were constraints to INS’s access, not a level playing field

b. Labor theory—AP’s investment of work.

c. Is court overvaluing their input into the news chain? Why not let market sort it out? What about a damage remedy? Remember AP can now sell this property right.

b. Cheney Brothers v. Doris Silk Corp. (1930)

i. Π clothing manufacturer, comes up with a particular pattern, ∆ copies it and sells a knock off. Cheney wants an exclusive property right for a limited time.

ii. Court does not grant this, so π is left with the exclusive “right” only for the amount of time it takes others to copy the patterns.

iii. This results in greater competition, more efficiency, but may deter people from investing if their work can be copied. But some will still want original.

iv. Institutional competence—court says copying is the norm absent statutory constraints—patterns are not copyright-able and court will not change that.

c. Virtual Works v. Volkswagen of America

i. Virtual Works registered , Volkswagen claims trademark infringement.

ii. Congress has passed a statute setting out series of criteria that must be met to find violation (i.e. bad faith—including wanting to profit off the big guys.)

d. Right of publicity cases—Court in Moore says they’re not property cases, BB disagrees.

i. included a right to control the public dissemination of your voice, image, etc, is an entitlement, to say its tort and not property right is a false distinction/pigeonholing

ii. Personality theory—things in which one has invested one’s personality should be considered property.

e. Moore v. Regents of Univ. of Ca. (entitlement and remedy, bundle of sticks)

i. Could have been more creative about the entitlement issue because they weren’t thinking about what their choices for remedy were.

ii. Moore was ill, treated at UC Hospital, used his cells for science research and created a patented cell line from them—they were unique. Moore sues for conversion, lack of informed consent, breach of fiduciary duty.

iii. Allowing π to go forward on conversion would be sustaining a property right that Moore had that was taken by ∆s.

iv. Court says informed consent & fiduciary duty are enough to protect pt, but all pt can do is say no, can’t license your cells, no compensable property entitlement.

v. Concern re Exploitation of his body parts without his consent—how broadly or narrowly do you state that entitlement and what impact that might have.

vi. Concern that if a property right is recognized people will sell it, but can have an inalienable property right—remedy can define the scope of the entitlement.

vii. Notice that he still can be exploited, though with informed consent.

viii. Court said he did not have enough to rise to the level of property, dissent says property can be anything, its just a stand-in for entitlement, then can have different rights to it, i.e. to sell, give away, or not, etc.—bundle of rights

ix. Custom—court looked at custom of scientific research.

x. Court says this rule is better for society, for advancement of research.

xi. Issues—autonomy, personality, sanctity of the person, progress of science.

xii. What’s bothering BB? Fairness? Π undercompensated by breach of duty remedy.

xiii. He is asking for right to share in the exploitation of his body parts, how could court grant him this? If had property right, could negotiate.

xiv. Issues whether there should be an entitlement are fact specific(i.e. Cheney,Moore)

xv. Could have a legislative rule that after or during surgery, if the med experts think that the particular organ or cell has broader value to society, upon proper notice to the patient, that organ could be contributed to the medical research process on the condition that the patient be properly compensated. Allows patient to have notice and proper compensation, does not allow patient to veto it (liability rule). As opposed to a rule that patient gets the same notice but allows patient to veto, not in the interest of science but very much in interest of personality theory.

xvi. Concern that whatever rule is made will effect supply and demand, i.e. voluntary transactions for a price, might lead to poor people selling their organs— fairness/ distributional argument, liability rule may increase supply.

xvii. What kind of institution should be balancing individual autonomy interests, interests in long-term scientific progress, interests of people who need kidneys?.

G. Adverse Possession

a. If, within the number of years specified in SOL, an owner of land does not eject a possessor who claims adversely to the owner, the adverse possessor takes title

b. Tacking—AP can be accomplished by more than one party, they have to be in privity with each other, and must be continuous.

c. Possession must be (these element encompass idea of “under claim of title”)

i. O-open

ii. C-Continuous

iii. E-exclusive

iv. A-actual/adverse/hostile

v. N-notorious

d. Rationale—

i. encourages productivity but its now recognized that leaving land fallow may be good for society. Should doctrine still be used?

ii. Quiet all titles which are openly and consistently asserted, proof of meritorious titles, etc. SOL works to prevent litigation of stale claims. Repose.

iii. We want owners to look after their property, make sure it’s being used efficiently. This rule punishes the lazy owner.

iv. Reliance interest of the adverse possessor – if he is living on the land and using it for his livelihood, is it fair not to let him reap the benefits? Also reliance of third parties/society’s expectations, who may recognize AP as the owner.

v. Holmes’ personality theory: once you use and occupy land it starts to become part of your being, it’s yours in some essential way. The land that a person has worked becomes inextricably intertwined w/ones thoughts about oneself.

vi. Marketability: rules of property law should enhance the number of transactions in the market. Having definite rules that cut off old claims and est. AP’s rights are thought to be better for markets than not knowing

vii. Assumes that O has knowledge of the law, if they get notice of occupancy they must do something about it (laid out in statute), i.e. bring action for ejectment, but doctrine sets high bar to address this.

e. Impact of a given court’s ruling on marketability of property, efficiency

f. Relationship to finder’s law. Even before SOL ends, except as to O, A has right to exclude. Court may not uphold b/c A is trespasser, but gen’l rule of first in time applies.

g. What if O is paying property taxes? Doesn’t seem to count, they can do it from far away.

h. Claim of Right issue—Must AP know you are on someone else’s land—differs by jurisdiction.

i. CT view/objective test

1. establishing AP shouldn’t involve inquiry into possessors state of mind.

2. Possessor’s actions must appear to the community to be acts of an owner

3. Possessor must be occupying land without permission.

4. in terms of the rationales behind AP, this is the rule that makes sense

ii. ME doctrine—

1. if possessor--no AP in cases of mistake, AP must know its not his—this is minority view, seems to reward bad faith.

iii. Subjective test—possessor must act in good faith, think it’s his.

1. Color of title—NY statute distinguishes on whether person comes in with a title (piece of paper)—I took from someone I thought had title and I thought I had it, turned out not to be a reasonable conveyance.

2. some just require that you say you’d leave if the owner came back, or if you knew it wasn’t yours.

iv. Boundary disputes—law may be different.

i. VanVelkenberg v. Lutz

i. Lutz occupied land for >20 yrs, built structures, grew vegetables, raised chickens, used a path thru property as a shortcut.

ii. Court said that land was not sufficiently improved because it was not used so much, also the enclosure was too flimsy. (i.e. not sufficient notice to owner)

iii. Also was not deemed to have actual possession of (use) enough of the land

iv. Can you create an absolute rule of how much of the land has to be used or should it be reasonable person on case by case basis (what reasonable O would notice?)

v. One part of the land he knew and admitted was not his, another part court says he couldn’t have known, but no AP for both.

vi. Very based on the NY statute. Statutes will be different out west

i. Mannillo v. Gorski

a. Interesting remedy—court forces sale of small part of land for FMV—efficient, ∆ is least-cost bearer(?)

b. ∆ made improvements to his house 20 yrs before, unknowingly built on π’s property. Π argued it wasn’t visible or notorious, so no AP.

c. O has to be on actual notice if it’s a small piece of land, as opposed to general rule that O should have known—encroachment on small area doesn’t create presumption of notice.

d. B/c it would force a hardship for ∆ to give back land, court invokes liability rule.

j. O’Keeffe v. Snyder

a. AP applied to personal property (painting)—but regular use of personal property is not necessarily open and notorious

b. Accrual—when the SOL starts to run against true owner, when the AP begins.

c. Snyder acquires painting from someone who may have been a thief—you cannot acquire good title from a theif

d. Court deals with potential inapplicability of AP to personal property by putting burden on O to show that she was diligent in trying to find her property.

e. If that burden is satisfied, SOL doesn’t run when you are trying to find it.

f. Should SOL potentially start when she found out it was stolen in 1946?

g. Rule of discovery—SOL doesn't begin to run against true owner until the identity of the possessor is known (1975). In order to take advantage of rule, must show

i. Diligence in trying to find/discover the painting, she acted like a prudent owner would act being apprised of its being stolen.

1. no mechanism in the art world to report stolen goods.

h. In regular theft/replevin situation SOL starts when thing is stolen.

i. Rule of this case: SOL starts to run at the time of the theft subject to the rule of discovery, in an equity fashion. (i.e. due diligence test).

j. This mitigates against harsh results that would flow from strict adherence to AP in cases of personal property that may be easily moved or concealed

k. Need to balance interest of true owner against possessor who may have bought from a thief

i. If O entrusts to a dealer, dealer can sell, even if O did not allow that. Rights of bona-fide purchaser—any entrusting of goods to a merchant who deals in goods of that kind give the merchant the rights to transfer the rights to the goods (i.e. selling)—this is very protective of bona-fide purchaser

1. reason—concerned about legitimacy and objectivity of market, marketability, if people could not buy from dealers with confidence that they could keep purchases, would reduce trade.

ii. If property is stolen, thief can only sell what he has which is nothing.

iii. Want rule that the party who can protect themselves at least cost should bear the risk—i.e. who could have determined more easily that they were dealing with a dishonest person (O to dealer vs purchaser to dealer).

k. Disability—SOL is either X years or, if there is a disability (insanity, minority, imprisonment) at the time the action accrued, then x years after the disability ends.

l. Liability vs. property rule

a. What if, when court found AP, they forced O to sell to A at FMV? We might feel more comfortable w/rule if O is compensated.

b. Difficulty in determining FMV and how much A contributed, ↑ transaction costs.

c. Property rule is based on productivty/labor theory—A has been acting as owner, has been creating his own entitlement, this rule does distribute wealth.

II. Estates

A. Overview

a. Divided into

i. possessory

|Freehold |Present |

|I.e. fee simple, life estate | |

|non-Freehold (i.e. leases) |Future-- |

| |remainders, executory interests, etc |

II. Non-posessory (servitudes)

a. Easements

b. Covenants

b. about your rights to use and covey the land

c. the bundle of rights to real property can be divided temporally (i.e. O to A for life, remainder to B—A has present possessory interest, B has future possessory interest) or non-temporally (i.e. concurrent interests--cotenancy, tenancy in common)

d. Origins in feudalism—king owned all the land and granted it to lords in exchange for certain services, they turned around and granted it to others—this system developed to describe the interests of the various parties in the land. (leading to frankalmoign, socage, and the famous feoffment in livery of seisen ceremony, still performed every year at midnight on the first Monday after the last Sunday of the vernal equinox…)

e. Seisen—fee simple, fee tail and life estate are freehold estates, and freeholders have seisen, possession of a particular kind and with particular consequences. They are seised of the land.

▪ Before 1536, to transfer freehold land, had to do feoffment with livery of seisin—grantor and grantee go to the land and grantor give grantee a clod of dirt…

▪ Seisen is basically indistinguishable from possession (but see below).

B. Leases

a. Nonfreehold possessory estates, were considered contracts outside the tenure system. So landlord still had seisen even though had given up possession.

b. Leaseholders do not have seisen.

c. Historically they were a way to avoid usury taxes

▪ You could borrow money in exchange for leasing your land and avoid taxes

▪ You could covey something less than a life estate, temporally (i.e. could convey a “term of years”, or maybe all leases are for a term of years and never for the life of the lessee) and in terms of what rights the lessee had.

d. With leases there is a reversion in/to O.

e. They arose in the commercial context so are seen to convey less rights than a life estate.

f. Modern leasehold estates: term of years, periodic tenancy, tenancy at will. Term of years is most important/common.

C. Life estate

a. used to be that “O to A” was a life estate (meant what we would write now as “O to A for life”).

b. Grantor had a residual right on A’s death to say what happened to the land, A was a life tenant. In feudal times there were only life estates.

c. Now, there is a reversion in O, or a remainder in another party, which are future interests. Reversion and remainder are transferable, devisable, inheritable.

d. Problems with life estate system that inevitably lead to default being fee simple (according to Billman)

▪ A can’t convey title to anyone else (but can’t you convey a life estate?)

▪ A cannot pass the land to his heirs, can’t provide for his children.

▪ A begins to have bargaining power (now that he sees that capitalism is the way and the light and the truth), says, hey O, if you want me to go to war for you and all that, you have to let me provide for my family by giving me the right to pass land on to my heirs.

▪ O says, well Ok then. For awhile, A is allowed to pass land on to heirs but not to convey the land to others.

▪ Then O realizes, well, if I want the land to be used most productively, I have to let A convey to subtenants. By end of 13th C., land is freely alienable.

e. Development of trust management for life estate holders (of real property, stocks, bonds, etc.)—3rd party manages the land and gives life estate holder the proceeds.

f. Life tenant can transfer the interest/estate, but only what she has, i.e. only for her life, then it reverts back to owner (or future interest holder). These transactions are risky b/c life tenant could go at anytime.

g. Future interests--There is always a reversion in O or a remainder in another party when a life estate is conveyed.

h. Life estate pur autre vie—measured by another’s life

▪ O to A for the life of B. (A has the estate, but B is the measuring life).

▪ C conveys her life estate to D—C’s is still the measuring life.

▪ This is devisable, i.e. the life estate holder can leave it to someone in her will, transferable—can be valued using mortality tables.

i. Valuation of the life estate and remainder (don’t ask)

▪ Would need to know this if court orders a property sold and the proceeds divided between life estate holder and remaindermen.

▪ Have to take into account the life expectancy of the estateholder (actuarial tables), the present value of the property, and the interest rate.

▪ For life estate, need to know the present value of the right to receive whatever proceeds one would receive from the property annually (present value of property x interest rate) x life expectancy of tenant.

▪ For remainder, need to know how long right to receive proceeds is deferred (same as life expectancy)

D. Fee simple--“O to A and his heirs” (historically); “O to A” (current)

a. “to A”—words of purchase

b. “and her heirs”—words of limitation. Heirs have no possessory interest. Have no say about what A did with the land—they have no rights to it until A dies (maybe also b/c there are no heirs until A dies).

c. It’s the biggest bundle of rights you can have, its transferable, inheritable, devisable, not defeasible if fee simple absolute (can’t be taken away by operation of law)

d. Common law is interested in making sure that every grant adds up to a Fee simple.

e. Absolute Fee simple—cannot be divested or end if any event happens.

f. Defeasible fee simple—may last forever or may come to an end upon the happening of an event in the future.

▪ Fee simple determinable—will end automatically when a stated event happens

• Conveyed by words having a durational aspect, i.e. so long as, while, until, during, i.e. “O to the Hartford School Board, so long as the premises are used for school purposes.”

• Future interest is a possibility of reverter in O, (but could be an executory interest if in 3rd party)

▪ Fee simple subject to condition subsequent (FSSCS)—may be cut short or divested at the transferror’s election when a stated condition happens.

• “O to the Hartford school board, but if the premises are not used for school purposes, the grantor has the right to re-enter and take the premises.

• Words like “unless,” “but,” “if?” “provided however,” “on condition that”

• Fee simple continues unless and until re-entry is made.

• Future interest is a right of entry or power of termination (if future interest is in a 3rd party, its FSSEL see below.).

• Right of entry may be express or implied if the words of the instrument are reasonably susceptible to the interpretation that this type of forfeiture of estate was contemplated by the parties.

• See p.242 for a tricky example re a tavern.

• This is the default—because a bigger bundle of rights in A, thought to be more marketable

Fee Simple subject to executory limitiation.

a. O to A, but if A no longer uses the property for her residence, to B.

b. O to A, but if B graduates from law school, to B.

c. What otherwise would be a FSSCS is FSSEL if the remainder is in a 3rd party.

E. Inheritance—

a. Heirs—people who survive the decedent and are designated intestate successors under the state’s statute of descent. You don’t have heirs until you die.

b. Spouse was not an heir at common law. Now is intestate successor of some portion depending on what other heirs there are.

c. Issue—direct descendants, i.e. children, grandchildren, etc. They inherit to the exclusion of all others.

▪ If child A dies before his parent O, A’s share goes to A’s children (i.e. O’s grandchildren) (but what if O has living children and grandchildren? Do grandchildren inherit if their parents are alive?--no)

▪ Primogeniture—oldest son inherited the land, daughters didn’t get anything unless there were no male descendents, not used anymore.

▪ Children born out of wedlock, used to not be able to inherit at all, now can inherit from mother, if paternity is established or acknowledged, from mother.

d. Ancestors-parents. They take as heirs if decedent has no issue.

e. Collaterals—other relatives (uncles, aunts, siblings, cousins, nieces, nephews), siblings take as heirs if there are not issue, ancestors or spouse, then goes to other relatives.

f. Escheat—if someone dies without heirs, their property escheats to the state where the property is located.

F. Wills—

a. people to whom things are left in wills are devisees.

b. An estate that can be left to someone in a will is devisable

G. Fee Tail—“to A and the heirs of his body”—the first of several attempts at dead-hand control

a. out of desire of rich folks to

▪ make land inalienable

▪ keep their profligate and imbecile sons from throwing it all away.

b. Purpose was to give land to A and his descendants, generation after generation.

c. Fee simple conditional—O grants to A and the heirs of his body. If A has issue, A can convey the land, cutting off inheritance rights of his issue. If not, A cannot convey the land. This pissed the barons off. So parliament gave them the fee tail

d. Descends to A’s lineal descendants generation after generation, expires when A & all his descendants are dead, then reverts to grantor or to whoever he has granted remainder to.

e. Originally, tenant in fee tail could alienate his possessory interest but could not affect the rights of succession of his issue (i.e. they got it when he died). But this was a mess.

f. Now a tenant in fee tail can “disentail” by conveying fee simple to someone else by a deed. Only 4 states still have fee tail (DE, MA, ME, RI). The result is that it excludes collateral heirs form inheriting.

g. Problem—what does “to A and the heirs of A’s body” mean today?

▪ A few states—A has a life estate, remainder in his issue.

▪ Some states—its just a fee simple absolute.

▪ Other states—A has a fee simple, but, if he leaves no surviving issue at his death, any remainder will be given effect (see p. 218) like FSD—poss. of reverter.

Future interests—when estate is divided temporally, what are the FI’s?

➢ Give legal rights to the owner of that interest.

➢ A presently existing property interest which may become possessory in the future.

o Depending on the type of interest, may be able to

▪ Sell or give it away

▪ Enjoin current possessor from committing waste

▪ Sue third parties who are injuring land or claiming title hostilely

➢ Interests retained by the transferor

o Reversion—O’s right to future possession.

▪ Results from hierarchy of estates—the interest left in an owner when she carves out of her estate a lesser estate and does not provide who is to take the property once that lesser estate expires.

▪ May or may not be certain to become possessory in the future.

• “O to A for life.”—O has a reversion that is certain to become possessory.

• “O to A for life, then to B and her heirs if B survives A.”—O has a reversion in fee simple that is not certain to become possessory. If B dies before A, O will be entitled to possession at A’s death. If A does before B, O’s reversion is divested on A’s death.

o Possibility of reverter—the interest remaining in O when she conveys a fee simple determinable

o Right of entry/power of termination—interest remaining in O when she conveys a FSSCS. Cannot give a right of entry to someone else, it’s a future executory interest.

H. Interests created in a transferee

a. Vested remainder (in fee simple absolute??)

▪ Must be

• Given to an ascertained person and

• Not subject to condition precedent (other than the natural termination of the preceding estates, i.e. by death)

▪ “O to A for life, then to B”—B has a vested remainder in fee simple absolute.

▪ Can have indefeasibly vested remainders, i.e. certain of becoming possessory, or vested remainders that may not become possessory.

▪ Vesting subject to divestment—a shifting executory interest can divest a vested remainder before it becomes possessory—

• O “to A for life, then to B, but if B does not survive A to C.”

• B has a vested remainder in fee simple subject to divestment by C’s shifting executory interest.

▪ Remainder created in a class of people--“O to A for life, then to A’s children.”

• if A has one child, it is vested.

• Since A may have more children, it is vested subject to open or vested subject to partial divestment.

• If A has no children, it is contingent because no taker is ascertained.

b. Contingent remainder—future events determine who gets the property. Happens naturally upon the ending of the prior interest (i.e. death).

▪ A remainder is contingent if

• Given to an unascertained (i.e. not born yet) person or

ii. “O to A for life, then to the heirs of B.” If B is still alive, takers are unascertained so this is contingent.

• Made contingent on some event other than the natural termination of the previous estate. (i.e. subject to condition precedent)

ii. “O to A for life, then to B if B survives A.” B’s remainder is subject to the condition precedent that B survives A.

iii. “O to A for life, then to B if B survives A, but if B does not survive A, to C.”—B and C have alternative contingent remainders.

▪ If the last interest is contingent, there is a reversion in O, even if it is never going to become possessory.

c. Look at the order of the words and the commas to tell the difference between vested and contingent remainders (see pp. 275-76)

▪ If the conditional element is incorporated into the description of the remainderman, the remainder is contingent (and the second interest is also contingent—the two are alternative contingent remainders), but if after words giving a vested interest a clause is added divesting it, the first interest is vested (and the second interest is executory).

d. Where there is ambiguity, courts will interpret something as a vested remainder

e. Vested interests have always been transferable and devisable, contingent remainders are as well in most states, also reachable by creditors.

f. Executory interest—can divest or cut short the prior interest.

▪ O “to A for life, but if B should marry during A’s life, then to B.”—shifting executory interest. Difference between executory interest and remainder, in case of remainder, kicks in on the natural termination of the prior estate, but this interest in b is only gonna happen if B marries during the life of a, its not the natural termination of the life estate, which shifts the ownership of A to B on the happening of that condition. Have to imply reversion in O, to have total fee simple. Reversion if B doesn’t marry within A’s life. If B satisfies the condition, he has a fee simple.

▪ O “to A for life, then to B if B should marry during A’s life.” B has a contingent remainder. It’s the “then to B” that makes it a contingent remainder. Becomes vested remainder when B marries, and becomes possessory when A dies.

▪ O “to A for life, but if B marries during A’s life, then to B.” This means that B would get it as soon as he marries. This is a shifting executory interest. If B does not marry during A’s life, reverts to O.

▪ Difference between contingent remainder and shifting executory interest is when the condition has the effect of changing the tenancy.

▪ Difference between condition subsequent and condition precedent???

I. Cases and Rule Against Perpetuity/Restraints on Alienation

a. Dead Hand Control

▪ FSC, FSSCS, contingent and executory—all forms of DHC, decide what will happen to land in the future and condition it on certain things.

▪ What courts have done

• substantive limitations, i.e. have not allowed certain kinds of grants

• Construction limitations—rules of construction favoring alienability and limiting DHC, presumption if there is ambiguity.

▪ Legislatures have enacted these rules re ROE and POR

• People who have ROE or POR have to record those interests and re-register at certain intervals.

• Cannot last for more than X years, after that, grant becomes fee simple.

• If condition imposed does not impose substantial benefits, void.

▪ Underlying policy concerns (need to balance them)

• free alienability

ii. wealth maximization

▪ reduces lending/business—discourages leveraged transactions

iii. distributional concerns—dist. Of land to more people

• vs. owner’s intent/enforcement of owners wishes—personality and labor theories of property would support this.

• what is least restrictive way to carry out grantor’s/donor’s intent?

b. Rule Against Perpetuities—one of a series of rules created by courts to limit grantor’s control.

▪ Contingent remainders must vest, if at all, not later than 21 years after some life in being at the creation on the interest. Remainders that do not have the possibility of vesting within 21 years of some life in being (the measuring life) are void, immediately, don’t wait the 21 years…..

▪ Allows grantor to have some say over property vis-à-vis people he knows (i.e. his insane son) and the next generation while they are minors.

c. White v. Brown

▪ O to E to live in and not to be sold. My house is not to be sold.

▪ E says it’s a fee simple, O’s other heirs say it’s a life estate with reversion.

▪ Court decides it’s a fee simple

• E was more sympathetic

• construction maxim calls for presumption of FS if ambiguous,

• preference for disposing of entire estate by will instead of partial intestacy—

ii. less alienable, hard for buyer to find & negotiate w/all heirs

iii. Tragedy if the anti-commons—the more you divide up interests in property the more underutilized it will be. .

• “not to be sold” is a restraint on alienability contrary to public policy.

• problem—court ignores writer’s intent when, unlike a lawyer, she would not have known the construction maxim.

d. Marenholtz

▪ O to A to be used for school purpose only, reversion in O.

▪ Question is, is it a FSD or a FSSCS

▪ Heir sold his interest to the Marenholtz’s, then released his POR or ROE to the school.

▪ At this time possibility of reverter and right of entry were not transferable, only inheritable and transferable to the fee simple owner, so that it would add up to fee simple absolute.

• if FSD, possibility of reverter may have occurred, and heir can transfer it (then it would belong to Marenholtz’)

• If FSSCS, hasn’t exercised right of entry, can only transfer ROE to FS owner, so it belongs to school.

▪ Presumption of FSSCS

• POR is greater restraint on grantee’s ability to sell

• but ROE makes less predictability for the public/potential buyers.

▪ But court decides its FSD.

▪ Modern trend is to find POR and ROE alienable.

e. Oddfellows v. Toscano

▪ Grant had restriction to “use and benefit of the second party, and in the event of non-use, sale or transfer by the second party”, reversion. (sale and use restrictions)

▪ Π are the Lodge, want declaratory judgment voiding clause as restraint on alienation, declaring FSA.

▪ ∆ argue it’s a conditional grant, not a restraint on alienation.

▪ Question is whether to sanction any restrictions grantor places, and if so how much to sanction them?

• can’t sanction direct restraints on alienability (i.e. sale restriction)

• what about sanctioning lesser restraints that have the same effect (i.e. use restriction)

▪ Adverse possession—if condition fails, when does SOL start to run

• with FSD/POR, begins when condition fails

• with FSSCS/ROE, arguably not until grantor attempts entry

ii. this allows grantor to sit on rights indefinitely—disfavored because of equity concerns, courts will look negatively.

▪ Balancing of free alienability with grantor’s wishes—denying any restrictions may discourage donors from making charitable gifts.

▪ Court upholds use restriction and says ∆ has FSSCS, they don’t have a good analysis of FSSCS vs. FSD.

▪ Π are using space as a parking lot, this may or may not violate use restr.

f. Baker v. Wheedon—valuation of land, rights of life tenant to sell, waste.

▪ Grant-- O to Anna for her life, then to her children, but if none, to my grandchildren (skips daughters). A had no children.

▪ A wants to sell land and get interest, not principle.

• land is not being put to highest and best use now—rental.

• if sold, $ could be put in constructive trust, A would get return on the proceeds.

▪ A says current value is $168,000, GC say value in 4 years will be $336,000. Can’t compare present and future value.

▪ Current value should take all known info into account so one of these #’s is wrong. But court accepts them and compares them (dummies)!

▪ Court says outright sale would be too harmful to remainder interests.

▪ This is kinda tragedy of the commons, and competing interests. Law of waste is supposed to avoid tragedy of commons in this situation.

▪ Remedy—A can petition the court based on necessity, they may allow sale of portion of the land

• this is very inefficient, keeps jurisdiction open

• flies in the face of what grantor would have wanted.

▪ A court can order a judicial sale if its in the interest of all parties and would not be waste. If LT sells at FMV, that is not waste.

▪ Life tenant can sell if doesn’t interfere with remainderman’s interest

• take into account grantor’s wishes and uniqueness of land

ii. land’s uniqueness makes it hard to value

iii. remainderman may have non-economic interest in it.

• if it were any other asset, i.e. stocks, there would be no question that LT could sell it, but maybe different because its land

▪ Law of waste imposes liabilities on life tenant re what they do w/land.

▪ Remainderman could have bought her out of the life tenancy (but what’s their incentive to do so, if she’s old?). Parties can always buy each other out of their interests (but, high transaction costs of bilateral monopoly).

▪ Trusts—In trust to A for life, remainder to B.

• trustee gets fee simple for life (of A), A gets equitable interest.

• A can transfer/sell assets, in line with fiduciary duty, may have to.

• Trustee has obligation (FD?) to preserve value for the remainder.

• trust is a corpus, divided into principle (B’s) and interest (A’s).

• what if land is in trust to A and ore is discovered underneath? Can A mine or must land/principle be transferred intact? Jurisdictions differ.

ii. If it’s the highest and best use of land, and reasonable, allowed in some jurisdictions.

iii. In others may have to get permission from remainderman.

▪ Waste—the major obligation of LT to remainderman.

• remainderman has right to monitor land for waste

• LT must make repairs but not improvements.

• passive/permissive waste—neglect of the property

• affirmative waste—overuse or misuse that decreases value.

• lots of questions about what is a reasonable use.

• Makes LT internalize the cost of damage to the remainder interest.

• a negligence/duty of care type rule

J. Concurrent interests

a. Tenancy in common

▪ One undivided property, each has an undivided interest in it.

▪ It is devisable, inheritable, salable i.e. A can sell it to D, D and B are TIC.

▪ they can sell without permission from the other.

▪ Much like O transferring to A and B separately but there is this legal fiction that each A and B have an “undivided interest in the whole.”

▪ No designated property owned by A, owned by B—it is an undivided interest in the whole property. They each have 50% interest in the whole.

▪ This is default today “O to A and B” is TIC, maybe even “O to A and B jointly.”

b. Joint tenancy

▪ O to A and B as joint tenants with right of survivorship.

▪ “to A and B jointly” might not be explicit enough.

▪ Each JT has interest in the whole and the share (see Swartzbaugh).

▪ Interest passes directly to B on A’s death. A cannot devise her interest by will because there is nothing more to devise.

▪ Requires 4 unities

• time—interests must be created at the same time.

• title—must acquire property by the same conveyance.

• interest—must have equal share/interest measured by duration (no longer needed)

• Possession—each must have right to possession of the whole (this is the same legal fiction for TIC).

▪ tenancy by the entirety—requires same + unity of marriage, otherwise the same except they own as one, one party can’t unilaterally sever.

▪ At common law, JT was preferred because favors alienability (party is in a smaller # of hands, feudal lords can collect taxes more easily).

▪ Major advantage—avoidance of probate because of survivorship.

▪ Either party can sever by conveying her interest to someone else (or self)

c. Riddle v. Harmon (strawman, can one sever JT by conveying to oneself?)

▪ Husband and wife have JT, wife severs it by conveying her interest to herself, to devise to an heir instead of having it pass to her husband.

▪ In the past this had been done through a straw man, she just eliminated intermediary, court held it doesn’t make sense to deny her right to do something directly that she could do indirectly.

▪ Policy

• is severance without notice, or unilateral severance, fair?

ii. Maybe because both parties can.

iii. But no notice is required

• Some jurisdictions require notice or registration of the change .

• problem of fraud, i.e. A could sever JT but if A survives, he could destroy that document so as to get B’s estate by survivorship.

d. Harms v. Sprague (mortgage as lien, not property, severance of JT)

▪ Brothers Wm. And John Harms were JT in property.

▪ John wants to help Sprague buy a house, cosigns mortgage and pledges property he shared w/Wm. as collateral.

▪ Does mortgaging the property sever the JT?

• perception of mortgage as lien on mortgager’s interest in the property, rather than conveyance of title, so does not sever JT.

• some states have title theory of mortgage.

▪ Since John’s interest passes to Wm on John’s death, there is no more mortgage.

▪ Warning to lenders to deal w/both parties of a JT.

▪ bank is only entitled to use as security for mortgage the share interest of the JT, i.e. half.

e. Delfino v. Vealencis (partition)

▪ Parties to JT or TIC can ask court to partition if they cannot agree.

▪ Π and ∆ own as TIC, π wants to buy ∆’s interest and develop the property, ∆’s garbage business is getting in the way. Π wants partition by sale.

▪ Court will divide in kind unless unfeasible

• would be impracticable or inequitable b/c of character of land.

• interests of parties would be better promoted by partition by sale.

▪ Court divided in kind. This may not have been WM.

▪ Partition by sale is now default (or BB likes it b/c WM, also ∆ got screwed)

▪ ∆ lived on land, may have been irrational about selling at FMV.

▪ Partition in kind ended up working a severe hardship on ∆.

f. Spiller v. Mackereth

▪ Π and ∆ are TIC of a building.

▪ ∆ entered and started using the building, π wrote letter demanding that he vacate ½ the building or pay ½ rental value, he refused, she sued.

▪ Holding: in the absence of an agreement to pay rent or ouster of CT, OT is not liable to CT for rent.

▪ Ouster: in this jurisdiction, CT would have had to actually come in and affirmatively attempt to exercise rights of occupancy, demand for rent and refusal not enough, in minority of jurisdictions demand for rent is enough.

▪ Ouster can start period of adverse possession.

▪ Why not just require OT to pay rent? Discourages productive use, also labor theory—OT is mixing his labor w/property, maybe entitled to more.

▪ But there is element of unjust enrichment (so have minority rule).

g. Swartzbaugh v. Sampson

▪ What does it mean to have undivided interest in the whole?

▪ Mr. S leases part to Sampson for boxing pavilion, lease goes forward despite one cotenant not wanting it, she seeks to have the lease cancelled.

▪ one JT can lease his interest in property to lessee w/o the other’s approval.

▪ Lessee steps into the shoes of lessor for the term of the lease, as a JT, so if lessor dies before the term is up, lessee is out (like Harms v. Sprauge).

▪ W/lease, JT can lease his interest in all the property, this does not sever JT

▪ If OT precludes the non-OT from coming in and exercising her rights to also occupy, that is an ouster and she would have right to be paid rent.

▪ Ouster leads to damage remedy, not injunction.

h. Rights and obligations of cotenants re improvements, repairs, natural resources

▪ If occupying tenant makes an improvement, generally he can’t ask cotenant for contribution, same for repairs.

▪ When they sell, cotenant can either get price of improvement and they split the rest, but the rule that makes OT internalize costs and benefits of improvements is that he gets all the value, + or -, of the improvements.

▪ Cotenant can sue OT for waste.

▪ If OT rents to a 3rd party, does CT have right to contribution?

▪ Cotenants have right to occupy, seek partition, and ouster rent.

▪ Minerals—cotenant can mine, but has to pay CT a portion.

Land Use Controls/Control of Incompatible Uses

Free Market→servitudes (contracts)→nuisance→fines/taxes→zoning→eminent domain(?)

BB on the spectrum of solutions to the problem of conflicting use: free market solution is all owners getting together and negotiating sales and purchases that would benefit everyone. There may be transaction costs that prevent this from happening. Servitudes take a contract and enforce it down the chain of title. He seems to think this could go a long way towards solving the problem. Nuisance is too unstable: with the various tests, there’s no way to know prospectively what kind of use is going to be a nuisance, or what sort of damages the court is going to award after balancing the equities. The advantage of zoning is that everyone knows ahead of time what kinds of uses are allowed. People can build their transactions on a stable law.

III. Covenants/servitudes

1. Covenants in general

a. as merger between K and property law.

b. Another way of exercising dead-hand control

c. Covenants at law and equitable servitudes—historically it was easier to enforce in equity (didn’t require privity). Does the law/equity distinction matter at all anymore?

d. Affirmative easement: right to use B’s land by A. Not a possessory interest, only right to do something on that property.

e. Negative easement: a restriction on the land, not enforceable at common law so people turned to K law and called them a covenant. I.e. B (burdened party) promises A (benefited party) he will only use the land for residential purposes

f. Because of Industrial revolution, courts started recognizing covenants that increased value of land to both parties.

g. Real covenant runs with the estate in land, not the land itself. So does not run to an adverse possessor, who does not succeed to the covenantor’s estate but takes a new title by operation of law. So there is no vertical privity where someone has title through adverse possession.

h. Equitable servitude attaches to the land itself, not to the estate.

i. Traditional difference between real covenants and equitable servitudes was the remedy sought—i.e. damages or injunction. Most π’s seek injunction, which they can then “sell” to the ∆, that way π not court gets to set the price of damages. With merger of law and equity, sometimes these distinctions don’t matter—RST 3 calls them both “covenants running with the land.”

2. Privity

a. was required for covenants at law running with the land (as distinguished from equitable servitudes).

b. Horizontal privity—the covenant is included in a grant of land, i.e. A conveys a parcel of her land to B, with a covenant that B will only use it for residential purposes. In England only landlord/tenant relationship was considered HP, in US grantor/grantee relationship was ok

A(benefited)↔B(burdened)

↕ ↕

D C

c. Benefitted and burdened party: In case of burdened estate, the successor in interest had to be an estate of equal duration and magnitude (suggests that if B granted a life estate only to C, that would not be an estate of equal duration so would not be vertical privity). ON benefiting side, rules were more flexible—D could still enforce if D has an estate of lesser duration and magnitude than A.

3. The following 3 cases can be seen as a map of how courts participated in evolutionary process from narrow instances in which servitudes ran with land to a general statement that they do.

4. Tulk v. Moxhay (England 1848) (got rid of need for horizontal privity)

a. Tulk (benefited) conveys to Elms (burdened) the park and gardens in with restrictions that it stay as a park and that he maintain it. Elms paid a price that was his estimation of what he could make off of the limited use of the land (i.e. charge for admission). Elms sells it to Moxhay without the covenant, presumably for more $, Moxhay seeks to exploit the property for its full economic potential, Tulk sues. Does covenant run from Tulk to Moxhay? No HP because Tulk and Elms are not landlord/tenant.

b. Elms tries to realize the difference between restricted value and full value by selling it without the covenant, court decides basically this is not fair.

c. There is vertical privity between Elms and Moxhay, holding is there does not need to be horizontal privity for covenant to run.

d. equitable servitude runs with the land against anyone who knows of its existence

e. What if one of the other neighbors around the park had tried to enforce? At common law no third party has right to enforce. At equity, can bring in third party beneficiary action, or may just say they do not require vertical privity.

5. Sandborn v. McLean (Michigan 1925) (relaxes vertical privity, inquiry notice, extreme case)

a. Implied Reciprocal Negative Easement!!

b. Mcleans want to build a gas station on their lot, neighbors say they are barred from making use of land in a manner so detrimental to the value and enjoyment of its neighbors due to a reciprocal negative easement.

c. All lots on the street were owned by one owner, who sold some with restrictive covenants (restricted to residences) and some without, McLeans’ lot was without.

d. constructive or record notice—you are charged with knowing what is on the record of your deed.

e. Inquiry notice—you are required to inquire what’s going on around you, look at other’s deeds/title based on what you see around you.

f. Extreme case of the enforceability of equitable servitudes.

g. Ideally developer should have had restriction in all deeds but short of that court finds grantor’s intent from common scheme of restrictions, which magically makes each individuals promise to the grantor into a promise from the grantor to all the grantees that everyone else will keep the same promise (i.e. reciprocal).

h. If you have common plan and the first conveyance contains the restriction, can imply a reciprocal negative easement.

6. Neponsit Property Owner’s Association v. Emigrant Industrial Savings Bank (NY 1938) (touching and concerning the land, vertical privity, affirmative covenants)

a. Involves affirmative easement in the form of an assessment included in every grant of a deed by developer, used to maintain common use facilities (i.e. sewers, benches, etc)

b. ∆ is bank that is the successor to one of the people who bought property from original grantor.

c. Problem—Neponsit Realty was grantor, Neponsit Property Owner’s Assoc is π, there is no vertical privity between them.

d. π is NPA—seeking to enforce a lien against the interest of the bank for failing to pay assessment.

e. NR assigned rights to collect assessment to NPA.

f. Court invoked doctrine of piercing the corporate veil to see who is NPOA—its members are the people who are supposed to benefit from the assessment. And the people who benefit from the covenant are in fact seeking to enforce it. Court is nodding in the direction of vertical privity, but relaxes requirement.

g. Covenant runs with land only if:

i. grantor and grantee intended that it run (touch and concern is evidence of intent) .

ii. covenant is one “touching” or “concerning” the land

iii. there is “privity of estate” between promisee (party claiming benefit and right to enforce convenant) and promisor (party burdened).

h. Touch and concern means not a personal obligation/debt of the promisor, distinguish by asking whether it would change the price/value of the land.

i. There isn’t really a good test of what does and what doesn’t so it is up to the courts.

j. Generally covenants that require an affirmative act (like paying $) as opposed to a restriction are not considered touching or concerning the land.

k. the assessment goes to the common property, not the particular land of the parties, this signals it doesn't touch and concern

l. But this seems to touch or concern the land because even though it is not about the individual plots, the grant gives an easement or right of public use to roads, beach, etc and these are what is maintained in the covenant.

7. Restatement of Property, Servitudes (2000)—where we are today

a. §3.1 Validity of servitudes, general rule (p. 886): A servitude is valid unless it is illegal or unconstitutional or violates public policy. Servitudes that are invalid because they violate public policy include, but are not limited to,

i. a servitude that is arbitrary, spiteful or capricious.

ii. a servitude that unreasonably burdens a fundamental constitutional right.

iii. A servitude that imposes an unreasonable restraint on alienation

iv. a servitude that imposes an unreasonable restraint on trade or competition.

v. A servitude that is unconscionable.

b. Gets rid of touch and concern requirement

c. Notice requirement is implied (?)—current law in most jurisdictions is that servitudes are valid subject to (actual, constructive, maybe inquiry (only Sanborn)) notice and the above exceptions.

d. Servitudes are enforceable subject to a fairly broad set of exceptions.

e. Basically, parties are free to contract and those promisies will be binding, with notice, down the chain of title.

8. questions to ask in a current case

a. When should court be involved in enforcing, not enforcing, or evaluating these contracts?

b. When will they not respect it, modify it, terminate it?

c. What kind of remedy should we look at if seeking to enforce it? Property rule (injunction) or damages?

9. Hill v. Community of Damien of Molokai (meaning of single family, implications of FHA, relationship between zoning and servitudes).

a. ∆ PWA group home operator, restrictive covenant, “no lot shall ever be used for any purpose other than single family residence purposes.” Neighbors, π--single family residence does not include groups of unrelated people living together.

b. if court is faced with choice to invalidate something or interpret it in a way such that it is valid, they will take the least invasive approach and interpret it such that it is legal. Courts can limit powers of the parties using rules of construction.

c. Rules of construction provide lots of leeway:

i. if language is ambiguous, resolve in favor of free use of property and against restrictions.

ii. Restrictions shall not be implied.

iii. Interpret covenants strictly, giving words ordinary and intended meaning.

d. Another way to interpret “single family residence” would be to look at what is built on the lot, the building/residence rather than the “family.” Could read the covenant as not aimed at the use as much as at improvements to the property.

e. The group home’s purpose was to provide a traditional family atmosphere for residents, people cooked, ate, socialized, supported each other like a family.

f. No indication that family was meant only to include people related by blood or law, zoning ordinance definition (not more than 5 unrelated people living together) cited as evidence

g. Strong public policy (FHA) in favor of allowing group homes – thus the covenant had not been violated.

h. FHA—even if covenant had been violated it would be void as against public policy because does not provide reasonable accommodation for disabled people.

i. Discriminatory intent—can include intent to use the covenant in a discriminatory manner, also the words of the covenant.

ii. Disparate impact—does covenant result in discrimination? court says yes.

iii. Reasonable accommodation—must afford a disabled person RA to use and enjoy the dwelling, unless it would impose an undue burden/hardship on other party. Statute forces a reasonable accommodation of the covenant to allow use by a protected class.

10. Shelley v. Kraemer (194_, now FHA would make this covenant illegal)

a. Racially restrictive covenant.

b. Court does not invalidate it, just says it will not enforce it, use of state action to enforce it would be violation of 14A.

c. It may not have been legal for a state recording office to record a deed like this.

d. Restatement would give you the view that covenant is invalid since it places an unreasonable burden on a constitutional right, but court doesn’t invalidate it.

11. Common Interest communities—the most common use of servitudes today

a. Pros

i. Efficiency through economies of scale—

ii. direct connection between “taxes” and services people want.

iii. Convenience

iv. Predictability—control over environment that may enhance value

v. Can be with people like you

vi. May keep disputes out of courts—efficient but larger community may not have needed info.

b. cons

i. fear that people will not want to participate in larger society/pay taxes, broader community may have trouble passing tax laws,

ii. substitutes private structure for the government.

iii. restrictions on civil liberties, but you have notice and can choose.

iv. Discrimination via restriction—proxies that don’t fall under FHA.

12. Nahrstedt v. Lakeside Village Condo Assoc. (CA 1994) (Billman doesn’t like this case)

a. What role should general court system play within these communities?

b. Do we give to much power to CIC’s over people’s lives?

c. Standard of review of charter provisions is rational basis, also looking at the charter as a whole, not the individual resident. This protects expectations of all owners. Presumption of reasonableness unless

i. Arbitrary—restriction on pets rationally related to health, sanitation, noise.

ii. Burden it imposes on π substantiually outweigh benefits to others.

iii. Against public policy—benefit to having pets but d/n rise to level of PP.

d. Standard of review of subsequent provisions is reasonableness (because less reliance of other buyers). For post-charter amendments an individual resident may have an opportunity to say the amendment is not reasonable in their particular case.

e. Reason for deference: This K is thought to be in the best economic interest of the parties from efficiency or wealth maximization perspective, also reliance & expectations.

f. ♀ in large condo development owns 3 cats, challenges restriction on pets as unreasonable as applied to her since her cats are in her apt and make no noise.

g. No notice issue, its in the deed.

h. Maybe arbitrary to restrict activity in own home, but they don’t want litigation about everybody’s pet situation, what benefit is accruing to community here?

13. Changed Circumstances

a. Strongly in favor of freedom of K for parties to make a K that at one point was efficient, what they thought was highest and best use of the land.

b. Free market is seen to produce most WM result so bias is not to intervene.

c. In changed circumstances, parties can bargain the covenant away (economics would tell us that if gain to A> loss to B there will be a deal.) Problem-holdouts.

d. Restatement (Third) of Property, Servitudes §7.10 Modification and termination because of changed conditions (Billman interprets this broadly)

i. If impossible as a practical matter to accomplish the purpose for which the servitude was created, a court may modify it to permit the purpose to be accomplished. If modification not practicable or wouldn’t be effective, court may terminate it. Compensation for resulting harm to the beneficiaries may be awarded

ii. If its purpose can be accomplished but b/c of changed circumstances the servient estate is no longer suitable for the uses permitted by the servitude, a court may modify it to permit other uses designed to preserve benefits of original servitude

e. law may be going in direction of modifying or terminating covenants when changed circumstances still confer some benefit.

f. What is the best remedy? Maybe A should have to share profits w/B, then internalizes cost to B. A damages remedy may approximate this, though a property remedy would allow parties to bargain for it.

g. Even when a covenant is no longer efficient, courts consider fairness and reliance interests. This gives a lot of power to holdouts and sets a high burden for party seeking to modify/terminate covenants.

h. The law likes freedom of K but not dead-hand control, covenants involve both.

i. Western Land Co. v. Truskolaski

i. ∆ owned a subdivision, sold single family residential use restricted lots. He wants to build shopping center on corner lot, argues conditions have changed such as to nullify purpose of K, also neighbors have violated it.

ii. Court says there is still “substantial benefit that inures to the parties by the continuation of the covenant,” even if residence not highest & best use.

iii. Change occurred outside subdivision, not inside. Buyer of corner lot can’t get benefit he didn’t bargain for and deprive inner lots of benefit paid for.

iv. Zoning ordinance has no effect on covenant (maybe if it makes use impossible)

v. In order for neighbors’ violations to constitute an abandonment of the covenant, they must be so general as to frustrate the original purpose.

j. Rick v. West (extreme case of upholding servitude, may not be upheld today)

i. Π sold ∆ single-family residence restricted lot, she built a house. He was unable to sell other lots, tried to get ∆ to release covenant so they could be used for other (commercial/industrial) purposes.

ii. Court: she has a right to continue to rely, she thinks she is getting a benefit, even if its subjective no balancing of equities is to be done.

iii. Maybe remedy should be that π has to compensate ∆ or share profits, this is what they would come to if they were able to negotiate.

k. Pocono Springs v. MacKenzie (can’t abandon property to get out of affirmative covenant)

i. ∆ bought lot in π’s development, tried to abandon it because it turned out not to be suitable for building a house, they thought it was worthless.

ii. Π sued to get association fees.

iii. Perfect title cannot be abandoned under state law, their intent to abandon is irrelevant, can’t abandon the obligation.

IV. Nuisance

1. overall issues

a. conflicting land use between adjacent owners. Whose rights do we recognize and how?

b. Ideally parties will bargain/negotiate some solution.

c. Property rights are in conflict with wealth maximization (i.e. allowing industry to go on).

d. Intentional vs. unintentional nuisance-

i. Intentional—∆ intends the conduct, had to know it would harm adjacent landowners, most cases we see are intentional, must also be unreasonable.

ii. Unintentional—i.e. factory was constructed negligently.

e. Limits of nuisance solution

i. Ex post character of common law decisions—institutional competence

ii. When there are 2 parties it may work, what about a little harm to many parties?

iii. If there are externalities, shouldn’t we have a test that looks at the externalities imposed on all people, not just the ones before the court?

iv. Not an efficient pollution controller because not all parties are before the court, even if they are there is a NIMBY problem.

f. 2 parts of the question

i. is there a nuisance? (intentional, these tests are about reasonableness)

1. threshold test—does the activity substantially interfere with another’s enjoyment of her property? What is “substantial?”—community norms?

a. Jost case—balance between harm and benefit irrelevant.

2. Restatement test—reasonableness: does the gravity of the harm outweigh the utility of the actor’s conduct, or if the harm is substantial and the actor could afford to pay damages without going out of business (this second part is only for damages cases/remedies). An interference with use and enjoyment of land, in order to give rise to liability, must be substantial; it must also be either intentional and unreasonable or the unintentional result of negligent, reckless, or abnormally dangerous activity.

a. How is this measured? Does it take subjective value into mind?

i. Efficiency, personality, labor theories of property.

b. Is it biased, industry will always win against the little guy?

c. If this test was used a nuisance would rarely be found—finding for business doesn’t get parties to negotiate a solution, which we want.

ii. what should the remedy be? (Calebresi 4-part chart)

|Injunction to π |Damages to π |

|No nuisance (i.e. ∆ has the right/injunction) |Injunction to π, damages to ∆--compensated injunction (Del Webb) |

1. best if parties can bargain because court costs add to inefficiency of result

2. we may want least-cost bearer to abate nuisance, not necessarily ∆.

3. injunction? lets parties set the price, clarifies entitlement, they can bargain.

4. Damages? court sets the price. Are they the best at assessing value of the rights? Do they have full info? This forces actor to internalize costs.

5. should courts come to a wealth-maximizing solution? Or respect the property right exclusive of WM considerations? How best to achieve that?

6. Injunction may actually lead to WM solution—courts clarifying who owns the right may allow parties to bargain when they couldn’t before, A has more bargaining power, B has more incentive to bargain.

7. if worry about π extorting ∆, would want court to set damages.

8. if court sets damages, that deprives π of potential gain of difference between $ of her harm and $’s cost to remedy—both parties could come out in a better position if there is bargaining room.

g. case (except for Del Webb) use threshold test, then use balancing for the remedy. But balancing test is part of determining whether there is a nuisance at all.

2. Morgan v. High Penn Oil Co. (1953)

a. Oil refinery emitting noxious gasses, neighbors seek injunction.

b. Use must substantially impair the π’s enjoyment of their property

c. Find an intentional nuisance--substantial non-possessory invasion of another’s interest in and enjoyment of land. Intentional—the invasion was the result of intentional conduct and ∆ knows that it is substantially certain to result from his conduct.

3. Estancias Dallas Corp. v. Schultz

a. court finds threshold nuisance and goes straight to remedy.

b. Big A/C tower creating lots of noise in π’s home, requests injunction.

c. Court determines there is a significant interference w/enjoyment.

d. Harm is valued at $25K, price to remedy is $150-200K, but court grants injunction.

e. Notice that now π can sell the injuction, this would be WM

f. ∆ complains trial court did not balance the equities, court says they implicitly did.

g. Court notes there is no housing shortage in Dallas so ∆ will not pass price on to tenants.

h. Personality theory (enjoyment of home) and first in time implicated.

i. If damages were given, would $25K be enough?

j. Distribution/allocation issue—they could split up the $125K gain potential (the difference between 150K and 25K) any way they want--we would like them to do that, is WM.

4. Spur Industries, Inc. v. Del E. Webb Development Co. (compensated injunction, coming to the nuisance)

a. Spur has a cattle feedlot, developer builds housing lots close to it, then sues for nuisance.

b. ∆ couldn’t have expected that its use, in rural area, would encroach on residential use

c. Del Webb made $ by going far outside of Phoenix into agricultural area to set up residential development. Maybe they went too far—coming to the nuisance.

d. remedy—compensated injunction—if π wants activity to cease he has to pay for the loss.

e. Public (affects general public)/private nuisance—issue of who can sue.

i. There is a public nuisance based on statute re business that produces flies.

ii. Every public nuisance is also a private nuisance.

iii. Need a special injury (harm in special way different from public at large) to sue for public nuisance. Otherwise att’y gen’l or leg/agency should address.

f. Judgment that higher and better use of land is residential use rather than agriculture

i. can see the result as balancing the equities in favor of Spur, but DW also gets what it wants, can also see it as looking for the WM solution (least cost bearer?)

5. Boomer v. Atlantic Cement Co.

a. Cement plant is spewing dust on residents property.

b. Court does not want to decide pollution standards, broader questions, etc.

c. permanent damage issue—do you liquidate all damages at once, or do you keep jurisdiction open and assess damages periodically? In this case the ∆ gets the entitlement, and court has to figure out how damages will be allocated. Court requires ongoing damages as a way to incent ∆ to find pollution reducing technology.

d. Court says we are not in a good position in an individual lawsuit to figure out what the technology is to reduce pollution and where to place the incentives to find the technology, don’t have info re overall industry.

e. That is role leg. and admin. agencies, using command & control, marketable permits, etc.

f. Courts will only fill in the interstices of the legislation, or address micro problems.

g. In a sense class actions are a microcosm of this macro problem (i.e. better than just an individual suit).

6. The role of nuisance law today—how could it be used?

a. Need more stable definition so parties can plan their affairs, Can common law provide this? I.e. did nuisance law give Estancias sufficient signal that use would be a nuisance?

b. What remedy—injunction, damages, no injunction, compensated injunction.

c. Courts have difficulty figuring out where in the 4 part matrix the remedy lies, and what situations warrant finding injunction, damages.

i. Which solution will get me closest to what would be the free market result?

ii. Nuisance/injunction remedies may give π too much power.

iii. If you think it is important for the π to vindicate their personality rights, you would want to expand injunction quadrant.

iv. If you are worried about π’s manipulating, would give damages.

v. Who is the least-cost bearer, who is in best position to abate nuisance efficiently?

d. Impetus to go back and think of nuisance as appealing way to address incompatible uses b/c of free market component in ability to sell injunctions.

V. Zoning

1. Background/theory (became popular ~80-100 yrs ago)

a. law of servitudes & nuisance was undeveloped, didn’t offer a comprehensive solution

b. At turn of C there was a desire to remedy horrible living conditions of cities, free market as a metaphor for what existed 100 years ago in cities—no regulation.

c. Nuisance, taxes/fees, covenants may have more important role today.

d. Zoning (prospective rather than reactive)--attempt to address urban problems by separating incompatible uses, protecting single family home and low/medium density development, light, air, open space. Health and wholesomeness w/sentimental pastoralism (wholesome living), faith in rational planning as solution to urban chaos.

e. A solution to the institutional competence and externalities problems.

f. Problems—

i. Promotes sprawl/low density use

ii. Can be used to exclude low income people or other undesirables.

iii. Anti-urban—supports single family dwelling as best type of living. (how is that rationally related to police power?)

iv. May have negative economic impact, restricts economic activity.

v. May have negative efficiency for an individual but idea is net economic gain.

vi. Redistribution of wealth/benefits—restrict WM potential of one landowner to the benefit of others, but supposed to produce a net economic gain.

2. Zoning Process

a. State enabling act gives power to localities to enact zoning ordinances.

b. Local legislature creates a comprehensive plan (i.e. intent to have ZC)

c. Delegates to an administrative/expert body, zoning commission, who suggest a particular zoning scheme, which legislature has to pass. ZC—substance, leg passes

d. Board of appeal addresses individual permitting issues in a quasi-judicial process.

e. Modes of attack/

i. Zoning board exceeded delegation

ii. Legislature made a standardless delegation

iii. Otherwise, standard of review (of the zoning overall) is rational basis (Euclid)

iv. Controlling BZA’s discretion—standards used, judicial-like hearing and decision.

3. Village of Euclid v. Ambler Realty Co. (1926)

a. Zoning ordinances are a legitimate exercise of the police power if rationally related to a legitimate state interest (i.e. health, safety, light, air, space).

b. Scheme divides zones into different uses, height and area restrictions, Euclidean/cumulative zoning--can have higher use on a lower-use zoned area.

c. Ordinance is adopted by city council and enforced by building inspector and BZA.

d. Π has lost value because of zoning scheme, brings a comprehensive challenge.

e. Zoning statute regulated the use of π’s property so as to protect the diminution of adjacent landowners land by uses of the land of the π, to prevent nuisance in advance

f. Court says it is rationally related to a legitimate governmental aim—promoting health, safety, welfare, i.e. the police power.

g. Court says we will defer to local legislature to determine and prevent nuisance/ incompatible use in advance.

h. Leaves open possibility of looking at injuries caused by zoning ordinances as applied to individuals (takings jurisprudence).

i. Important that the zoning scheme uses the law of nuisance to implicate police power.

j. Does this decision allow economic development because there’s less chaos, or is it a straitjacket on economic diversity? May protect industry b/c suits for nuisance less likely

k. Concern re economic segregation.

l. w/cumulative zoning could still have a nuisance claim, but π would have notice that she’s in industrial zone, wouldn’t change the fact that it’s a nuisance but may change calculus.

4. PA Northwestern Distributors v. Zoning Hearing Board (nonconforming use)

a. Adult bookstore is opened, a few days later board passes an ordinance restricting them, gives them 3 months amortization.

b. Non-conforming use—an already existing use that became restricted by zoning.

c. Court says cannot restrict the use after its already there, without compensation. “A lawful nonconforming use establishes in the property owner a vested property right which cannot be abrogated or destroyed, unless it is a nuisance, it is abandoned, or it is extinguished by eminent domain.”

d. Support is labor theory of property—investment gives a vested right.

e. Court may have ok’ed the amortization if it had been longer, they say its unreasonable.

f. Other courts hold that localities can restrict existing use with reasonable amortization periods that allow owners to recoup their invested capital.

g. This may make more sense—distinction between reduction in value for existing and potential use doesn’t really make sense economically.

h. This is an extreme case focused on 1 particular use, court doesn’t like this.

5. Commons v. Westwood Zoning Board of Adjustment (variance)

a. Variance—permission to do something that is not allowed under the zoning ordinance, granted if application of the ordinance would result in exceptional and undue hardship on the owner and would not cause substantial detriment to the public good or substantially impair the intent and purpose of the zoning plan and ordinance.

i. Undue hardship—land is virtually unusable if you comply w/ordinance, owner has made effort to bring it into compliance, i.e. could not get reasonable price for it and could not buy add’l land, could not sell it to neighbors.

ii. Will be denied if condition is self-imposed, i.e. sold off part of lot.

b. Zoning board and leg will make a plan but can’t consider everything that may come up.

c. Zoning ordinance required a certain amount of frontage and houses of a certain size—query whether ordinance was about property values or health, light, air, etc.

d. The other issue in this case—procedural due process/discretion to BZA. Court says they are making quasi-judicial decision, must substantiate their decision with documentation so that it can be reviewed--written findings of fact, application of legal standards to facts.

e. BZA said owner needed to present better plans to show non-impairment of general plan.

f. Neighbors can come in to testify about the effect of the variance, i.e. their entitlement allegedly is impaired (diminution in value, privacy)-- Notice that the third party is again the single-family residence owners who claim they will lose value.

g. Does nuisance then become diminution in value? Is that what ordinance is protecting?

h. Area/dimensional variances are easiest to get and most common (re space, light, air).

i. Use variance—more difficult to obtain, higher standard for proving undue hardship and no impact on overall scheme.

j. Transferability of variances

i. Variances run with the land, price may reflect chance of getting/not getting variance, otherwise puts premium on seller getting it before sale.

ii. If A has a reasonable request for a variance so does buyer B, steps into A’s shoes.

iii. Buyer may not get if he buys with intention of changing the use.

6. Cope v. Inhabitants of the Town of Brunswick (special use, standardless delegation)

a. Special use—the legislature has contemplated the use, it is articulated in the zoning plan, allowed if criteria are met. Something that the zoning allows under certain circumstances.

b. Π’s want to build apt in area not zoned for that, the exception is specifically enumerated in the ordinance, sets out 4 requirements such that if they are met, special use should be granted. The resolution in theory authorized apartments in an otherwise residential zone if the standards are met.

c. Two of the requirements are found to be unconstitutional delegation under ME const, because they are coterminous with the police power, they are standardless, legislature is delegating its function to the board. BZA can’t be permitted to consider legislative question anew without clear, objective, specific guidelines.

7. State v. City of Rochester (zoning amendments, spot zoning)

a. City council amended zoning ordinance to allow high-density residential use in an area formerly zoned as single-family or low-density residential use. Neighborhood association says its spot zoning—island of non-conforming use benefiting 1 party.

b. There is more deference given to legislative than to BZA decisions, which need findings of fact and are reviewable, concern re capture, so amendments may be of more concern than variances/special uses. Some courts review them more closely than rational basis.

c. MN enabling legislation did not allow variances and special use wouldn’t be granted.

d. Ideally ZC would periodically review comprehensive plan to see if changes need to be made based on changed conditions

e. Smacks of spot zoning—1.1 acres owned by 1 person.

f. But there were similar buildings/uses on 2 sides, single family residences on others.

g. Was not incompatible with overall plan or detrimental, may have had positive impact because of need for housing (i.e. rationally related to gov. interest).

8. Village of Belle Terre v. Boraas (definition of family, substantive due process)

a. Question of the proper scope of constitutional review for zoning

b. Small town, typical single-family use restriction, single family=blood, law or 2 unrelated people, try to kick out 6 unrelated students living together, who sue for unconstitutional.

c. Both sides agree its reasonable to have single family restrictions and that resolutions trying to achieve a pristine view of quality of life are valid.

d. Douglas does not see right to live with whoever you want to be fundamental right, so applies Euclid-type rational basis test.

e. Marshall thinks the definition implicates freedom of association and right to privacy so applies strict scrutiny, says if there is a compelling governmental interest, it is not being met in the narrowest way possible.

f. Court is still accepting rational basis scrutiny for zoning 50 yrs later.

g. States have been willing to apply heightened scrutiny to this kinda stuff.

h. Moore v. City of East Cleveland—court limited holding in Belle Terre, said a definition of family may be subject to strict scrutiny and implicate a fundamental right.

9. City of Edmonds v. Oxford House (definition of family, FHA, group homes)

a. Oxford house—group home for 10-12 recovering addicts in single family zone, city issues criminal violations to them, they ask for reasonable accommodation under FHA.

b. FHA has an exception that it does not apply to rules re number of occupants (i.e. floor area per person—FHA wants to leave that kind of exercise of police power alone)

c. City contends the exception also applies to definition of family that includes =1 BR, developer had to pay school expenses if >.3 children/family. Aside from PUDs only detached single family allowed.

iii. Thwarted plans to build subsidized housing in the 1 poor area of town.

iv. 30% zoned for only industrial use, is not being used—court focuses on this.

f. states are more willing to draw regional lines and to find housing a fundamental right.

VI. Eminent Domain

1. Always ask

a. What is the use/objective of the police power here?

b. Is the means chosen rationally related to the problem identified?

c. For categorical rules, query whether we should be more concerned about capture, discrimination or inefficiency for permanent physical invasions or 100% diminutions.

2. Power of ED

a. Due process clause: State cannot deprive person of their property without due process,

b. takings clause: no person shall have their private property taken for public use without just compensation.

3. big questions

a. when does gov’t have power to make individual give up her property for a greater good

b. what is court’s role in scrutinizing legislative decisions? Institutional competence?

c. What is a public use (Hawaii Housing, Poletown?)

d. Regulatory takings—when must they be compensated?

4. Rationales (What about liberty and autonomy?)

a. To prevent holdouts who stand in the way of needed services.

b. All property rights emanate from the state so can be taken back

c. Why compensate? Fairness, liberty/autonomy, incents people to invest in land, makes gov’t be efficient (but gov’t decisions are political not economic, taxpayers are paying)

d. Distributional question—who should pay, individuals or taxpayers?

5. Hawaii Housing Authority v. Midkiff (USSC)

a. There is an oligopoly on landownership on Hawaii, HHA has set up program requiring owners to sell to tenants at FMV, taking LLs reversionary interest and selling it to tenant.

b. “Public use” as a limit on gov’ts ability to be a broker for private-to-private transactions.

c. Public use=public purpose=permissible scope of the police power.

d. Public purpose—to create fair real estate Market w/o such inflated prices, there is a rational relation between this and the legislation.

e. Court shows significant deference to legislature, accepts public use, though its not so strong a claim, since its being transferred to private individuals.

f. There is some collective coming together—at least 25 or ½ tenants must request it.

g. The surplus goes to a large # of people, gives public use character.

h. LL’s were being strategic and holding out but did not have subjective value.

i. Case says takings power is coterminous w/police power, but when is it a taking and when just an exercise of PP that is not a taking? When does use of PP become a taking?

6. Poletown Neighborhood Council v. City of Detriot (MI SC)

a. Gov’t is condemning property to build a GM plant to create industrial site.

b. Is it a higher and better public use to take the property of individual landowners for GM? Legislature focuses on the condition of the economy of this area, high unemployment, industry is leaving, GM is threatening, court says under PP this is a legitimate exercise for legislature to do things to spur the economy. OK to support industrial development in the name of health, welfare, public safety.

c. Π’s argue that whatever incidental public benefit accrues, its really a private use by GM.

d. court said the primary benefit is public and the incidental benefit is private, dissent says the opposite. Court doesn’t give you any standards on which to judge this.

e. Maybe courts should apply heightened scrutiny when

i. there is subjective value—value you attach to land that is unique/irreplaceable/non-fungible to you.

ii. when it looks like 1 party is capturing the whole surplus/premium (that accrues from the higher and better use they put land to after taking) and may have captured the legislature/being strategic to capture surplus.

iii. Scrutinize the one party’s good faith—did they try to use the market?

f. Maybe we should not allow takings and should let the market work in some cases

i. Why doesn’t GM use market--holdouts, costs of negotiation.

ii. Maybe gov’t will always try to use market first b/c transaction costs are higher for takings—need legislation, etc. But govt is not RSE, may not internalize costs.

g. Does the case, w/HHA, read out any restriction that it must be a public use?

h. Should there be a higher burden on legislature to show public use?

i. Fair market value--the price at which a willing buyer and seller, both having complete information and not being under any compulsion, would trade at.

j. Query whether gov’t should pay FMV (fiduciary duty to taxpayers) or subj. value (fair).

7. Loretto v. Teleprompter CATV (USSC 1982)

a. Categorical rule: a permanent physical occupation authorized by government is a taking without regard to the public interests that it may serve. (no balancing is necessary)

b. Gov’t allows 3rd party, cable co., to install wires and boxes for purpose of public ed. (pretty stretched governmental interest/use of the police power).

c. Temporary physical invasions may be subject to balancing—how to distinguish between permanent and temporary?

d. Right to exclude is one of the biggest sticks in the bundle, this limits that.

e. Causby—direct military overflights are compensible taking.

8. Hadacheck v. Sebastian (USSC 1915)

a. Zoning ordinance prohibiting operation of brickyards in areas of LA, is it a taking?

b. π had the brickyard there when it was legal and outside of the city, now city has grown to it (coming to the nuisance?—but different from Del Webb b/c the entire city has come).

c. If the government regulation is a nuisance-control measure, then its not a taking, but an exercise of police power, court finds there is enough evidence to say it’s a nuisance.

d. Court said π wouldn’t be deprived of all property, could truck clay elsewhere (but realistically could not).

e. This distinction has been criticized—hard to distinguish between nuisance control measure and public benefit conferring measure.

f. Now this case would fall under Penn Central balancing test, but under “nature of the gov’t action” it would probably fail as a taking.

9. Some terms

a. Reciprocity of advantage—burdened parties also benefit as members of the public

b. Investment-backed expectations—the expectations of the owner based on which he invested in the property? They are part of/way to measure economic value.

10. Pennsylvania Coal Co. v. Mahon (Holmes 1922)

a. homeowners were sold land from Coal Company, Co. retained land underneath with K that they could mine it (allocated burdens differently than legislature), they wanted to mine it and π said Kohler Act, which bans coal mining where it would cause problems to any structure on the surface, prohibits it.

b. Case is a highwater mark for judicial scrutiny of legislative activity (ugh, admin!). They don’t accept legislature’s characterization of nuisance, but say because

i. Party had notice

ii. This only affects this 1 house

So its not a nuisance (but it actually affected the whole city).

c. The way the property interest is defined/atomized is crucial to how it comes out.

i. Three estates—regular coal nearby, supporting coal underneath, and surface.

ii. They could all be held by different parties, so there is an alienable interest in each.

iii. This allows Holmes to say that this was a complete denial of all their rights (to the subsurface coal)—“has very nearly the same effect for constitutional purposes as expropriating or destroying it.”—all rights to supporting coal are gone. This atomizing causes problems for takings (see Lucas)

d. Not about public nuisance but about 1 private interest against another so not a proper exercise of the police power. Assumes it only affects this 1 house, where burdens had already been distributed.

e. Property may be regulated but if the regulation goes too far it will be recognized as a taking. (why does Holmes get props for such a useless test?). Going too far seems to require a more or less complete destruction of the rights.

f. Test: when governmental regulation of a use that is not a nuisance works too great a burden on property owners, it cannot go forth without compensation

g. Court later upheld almost identical statute (Keystone—bundle defined more broadly)

h. Today, more deference to legislature (i.e. this is before Euclid) –but what about Lucas?

i. Redistribution issue—without deference a lot of these cases would go the other way—few parties are paying for the benefit of all.

11. Miller v. Schoene (1927)/hypo

a. 2 orchards, apple trees and cedar trees, apples are commercial orchard, cedar trees are ornamental, no significant commercial value, cedar trees have a fungus that if apple trees get it they will die, state of VA passes regulation that if anyone owns cedar trees within 2 miles of apple trees, must cut down cedar trees.

b. Cedar tree owner comes in and says, fine but you have to compensate my cedar trees.

c. What is the rational basis/intent of the legislature?

i. To protect industry (Economic regulation is part of the scope of the police power)

ii. Maybe nuisance, use (keeping infected tree) will adversely affect neighbor’s use.

d. Different ways this problem (incompatible land use) could be dealt with

i. nuisance claim

ii. covenant

iii. public use of police power.

12. Penn Central

a. Grand Central station owners want to build a skyscraper on top of this landmark and are barred from doing so because of landmark legislation, which is part of overall zoning scheme, they sue saying it’s a taking of their air rights.

b. In exchange for not being able to build to the extent to zoning plan would allow, they get transferable development rights which they can sell to others.

c. What is the rational basis? Public interest in preserving landmarks for future generations, part of overall education and welfare of the citizens to be able to see landmarks…this is a bit more amorphous use of the police power.

d. Court does not allow them to split up their rights into air rights, surface rights, etc. does not buy this atomization (the denominator thing). They want to argue it was a complete taking of their air rights. Court takes a more wholistic view of what rights π owns.

e. Court is unlikely to find a taking if doesn’t fall under categorical rule--law supports police power regulation of business and social activity without compensation.

f. ad hoc analysis

i. justice and fairness—(character of government action)

1. does it affect one person or is it more broadly based?

2. substantial presumption that the state can regulate noxious use activity.

ii. Economic impact of regulation on landowner (maybe if it affects you ................
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